832.61333/3–1346
The Acting Secretary of State to the Brazilian Ambassador (Martins)
Excellency: I have the honor to acknowledge the receipt of Your Excellency’s note of March 13, 1946 regarding the difficulties in which the Brazilian economy is placed by the maintenance in this country of controls on coffee import prices.
The Department has been aware for many months of the inequities caused by increasing costs of coffee production and the stabilized maximum buying prices which up until November 18, 1945 our importers could legally offer for green coffee intended for United States consumption.
During the war period the stabilization authorities of this Government were forced, in order to follow the anti-inflationary policy which was of so much importance to your nation as well as to mine, to refuse reluctantly the several requests of the coffee-exporting nations of this Hemisphere for higher coffee ceiling prices or for elimination of such ceilings. This action was considered unavoidable under the circumstances. I believe that it was understood in Brazil. Indeed, my Government is grateful to the Brazilian Government for having entered into several important coffee supply arrangements during the war.
Following the conclusion of the war late last summer, officers of this Department made renewed approaches to the stabilization authorities on the question of coffee prices. As a result, negotiations were started early in October with your Government, looking toward a price stabilization arrangement in return for suspension of coffee ceiling prices. These negotiations were marked by unusual delays both before and after the change of government in your country late in October. The counter-proposal of your Government, received October 25,36 was carefully examined but was not considered acceptable here. Our supply situation was then so desperate that a swift solution of the dilemma had to be found. The three-cent coffee subsidy was then decided upon as an emergency measure and was announced November 17, 1945.
This subsidy of three cents a pound on green coffee has, as announced on March 19, been continued and will now apply to 13,500,000 bags purchased after November 17, 1945 and imported by June 30, 1946. The proposal for continuation of the subsidy was on March 11 laid before a meeting of the Inter-American Coffee Board at which you were a guest.
[Page 509]The three-cent subsidy has permitted our importers to increase their buying prices for Brazilian coffee an average of about 25 percent above the ceiling prices formerly prevailing. This is a very sizeable rise and should go far toward redressing the inequities which you mentioned. Furthermore, the three-cent increase in our buying prices goes more than half way in meeting the requests of the coffee-producing countries as a group for a straight five-cent increase above the ceiling price.
Nevertheless, we regard the continuation of the subsidy to June 30 as a stop-gap measure. It is our feeling that a more permanent type of solution should be reached if possible in the interval before June 30. In this connection, we are interested in the intimations made both in your note and by the Brazilian representative at the March 11 and March 14 meetings of the Inter-American Coffee Board that your Government is ready to cooperate to the fullest extent with my Government in an effort to avoid runaway coffee prices and in working out some form of stabilization arrangement, provided the competent authorities in this Government reach agreement on some plan for either eliminating coffee price ceilings or for a reasonable increase in the ceilings. The matter will be taken up immediately with the stabilization authorities. I am hopeful, therefore, that your Government will not hesitate to make such proposals along these lines as it believes adequate to meet the circumstances.
It is the belief of the officers of this Department, charged with responsibility for coffee matters, that the stabilization authorities will view arrangements such as those described in the paragraph above more favorably if the present subsidy program is successful. If a reasonable stock of coffee can be built up here, pressure for continued temporary stop-gap supply measures will be lessened. Therefore, it appears to these officers that it would be helpful if your Government, as well as those of the other coffee-exporting countries, took all necessary steps to expedite shipments of coffee during the coming weeks of the subsidy period. We are particularly concerned over the serious situation in the port of Santos where a large number of ships are waiting to berth and discharge cargo or to be loaded. Unless conditions there improve very shortly, it is probable that shipping will have to be diverted from Santos. This I am sure your Government will wish to avoid in view of the shortage of United States goods in your country and also in view of the time limit on the coffee subsidy. It would be unfortunate not to have Brazil participate fully in the subsidy program and thereby augment her holdings of dollar exchange which, you point out, have to be husbanded so carefully.
Accept [etc.]
- See telegram 3225, October 25, 1945, from Rio de Janeiro, Foreign Relations, 1945, vol. ix, p. 698.↩